Strata Titling Property Investing
Strategy
Investors make profits by purchasing existing multiple dwelling houses or units, and applying to the local council to have the block broken down into a number of separate titles to sell them individually.
Keys to Make it Work:
- Knowing the council you are dealing with
- Good understanding of the town plan
- Research on the costs and gains of the deal
- Knowing where to find these properties
Financial Requirements:
The banks usually consider borrowing for this type of investment residential and are willing to lend more, up to 70% before strata titling and 80% + post strata titling.
Investors should prepare to purchase the property using leverage during the council application period (investors need to come up with 30% deposit or more).
Time Frame and Exit Strategies:
Once the strata titling application being approved, investors can either sell the properties separately or refinance the deal and keep the properties for cash flow purpose.
The Return Perspective:
The return on investment using this strategy varies from deal to deal depending on their end costs. While finding the right stocks, the profits can be substantial.
The Advantages:
Once the council approves the application, the properties can be sold individually. With their own titles and an efficient cost structure, they could be worth more individually than they were under the same title.
The Potential Risks/Difficulties:
Once the titles are separated, the individual properties will have its own set of maintenance and electrical costs.
Often the council requires modifications to be carried out to the properties, as well as additional parking requirement and other restrictions as part of conditions of approval. Some of the properties simply can't or aren't capable to meet those extra requirements due the reasons beyond investors' control.
Not all strata titling will make good money. Costing out the project ahead of the purchase is essential for investors using this strategy.
Fire regulation is often the most difficult issue investors face. The walls separating the units need to meet certain standards of fire rating established by their local council. Sometimes this could be a very costing job for investors.
Finding the right stocks for strata titling in the major cities is very difficult due to the very high costs the council would charge for each unit or block titling.
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